The behaviour of the real exchange rate: Evidence from regression quantiles

Nikolaou, Kleopatra

doi:10.1016/j.jbankfin.2007.05.002

Cited by 35 publications

(39 citation statements)

References 52 publications

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“…The results clearly indicate that there is a significant difference in mean reversion when NTD suffered under the impact of higher and smaller disturbances. Such results are consistent with Nikolaou () and indicate that when quantile unit root test is compared with traditional unit root test, it displays more clearly the true nature of the behaviour of RER.…”

Section: Resultssupporting

confidence: 89%

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Exchange Rate Reversion Under Regimes Other Than Free Float

Lin

2012

Int. J Fin Econ

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Several studies indirectly point out that the exchange rate system may be one of the factors for establishing purchasing power parity (PPP). However, current researches on PPP have mainly focused on the recent floating period and need various statistical models to carry out. We use quantile autoregression technique to comprehensively examine the mean reversion properties of the New Taiwan Dollar (NTD), where the NTD was both in a fixed regime period and a managed floating system period. Empirical findings indicate that NTD showed comparatively faster recovery when subjected to a larger or positive disturbance from the market. Additionally, when NTD was in a fixed regime period, PPP was mostly established. But during the managed floating system period, it was only partially established. These results suggest that mean reversion of real exchange rate heavily depends on the regime effect. Copyright © 2012 John Wiley & Sons, Ltd.

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Section: Resultssupporting

confidence: 89%

“…For the whole research period analysis in Table , its empirical results show that high quantile comes more quickly than middle and low quantiles for the speed of mean reversion of the two kinds of RER, which confirms Nikolaou's () results. For example, when NTD/USD is at 0.99 quantile, its half‐life is 14.40 months.…”

Section: Resultssupporting

confidence: 70%

Exchange Rate Reversion Under Regimes Other Than Free Float

Lin

2012

Int. J Fin Econ

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“…See, among others, Papell and Theodoridis (2001), Koedijk et al (2004), Serletis and Gogas (2004), Sarno and Valente (2006), and Kasman et al (2010). 3 In a recent study, Nikolaou (2008) uses unit root test for non-normal processes based on quantile autoregression inference in semi-parametric and non-parametric settings to analyze the impact of different magnitudes of actual shocks on mean reversion in RERs. 4 Another important branch of studies for PPP is based on panel data.…”

Section: Methodology and Test Proceduresmentioning

confidence: 99%

Is the evidence for PPP reliable? A sustainability examination of the stationarity of real exchange rates

Zhou¹,

Kutan²

2011

Journal of Banking & Finance

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“…A stylized fact of the post-Bretton Woods float, however, is the difficulty of distinguishing real exchange rate behavior from random walks and therefore the relatively weak evidence for PPP. Empirical research has successively relied on various methodological approaches to consider the validity of PPP, including cointegration tests for nominal exchange rates and prices, variance ratios tests, long horizon regressions (Serletis and Goras (2004)), quantile regressions (Nikolaou (2008)), and unit root tests on real exchange rate series 2 but despite the voluminous literature the profession's conventional wisdom concerning PPP remains, in general, inconclusive. Hakkio (1984), Abuaf and Jorion (1991) and Wu (1996) represent early attempts to utilize panel data sets as a means of increasing the power of unit root tests in PPP studies.…”

Section: A Review Of Some Issues Related To Pppmentioning

confidence: 99%

Getting PPP right: Identifying mean-reverting real exchange rates in panels

Chortareas

Kapetanios

2009

Journal of Banking & Finance

181

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Recent advances in testing for the validity of Purchasing Power Parity (PPP) focus on the time series properties of real exchange rates in panel frameworks. One weakness of such tests, however, is that they fail to inform the researcher as to which cross-section units are stationary. As a consequence, a reservation for PPP analyses based on such tests is that a small number of real exchange rates in a given panel may drive the results. In this paper we examine the PPP hypothesis focusing on the stationarity of the real exchange rates in up to 25 OECD countries. We introduce a methodology that when applied to a set of established panel-unit-root tests, allows the identification of the real exchange rates that are stationary. We apply procedures that account for cross-sectional dependence. Our results reveal evidence of mean-reversion that is significantly stronger as compared to that obtained by the existing literature, strengthening the case for PPP. Moreover, our approach can be used to provide half-lives estimates for the mean-reverting real exchange rates. We find that the half-lives are shorter than the literature consensus and therefore that the PPP puzzle is less pronounced than initially thought.

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The behaviour of the real exchange rate: Evidence from regression quantiles

Cited by 35 publications

References 52 publications

Exchange Rate Reversion Under Regimes Other Than Free Float

Exchange Rate Reversion Under Regimes Other Than Free Float

Is the evidence for PPP reliable? A sustainability examination of the stationarity of real exchange rates

Getting PPP right: Identifying mean-reverting real exchange rates in panels

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